The Pak Banker - - NATIONAL -

"The Fed­eral Board of Rev­enue (FBR) is cog­nizant all is­sues em­a­nat­ing out of SRO 98(I)/2013 dated 14 Fe­bru­ary 2013 and steps are be­ing taken to ad­dress all prob­lem­atic is­sues in con­sul­ta­tion with In­sti­tute of Char­tered Ac­coun­tants of Pak­istan (ICAP) so that busi­nesses may not be ad­versely af­fected due to new set of sales tax with­hold­ing rules".

This was stated by Khawaja Tan­veer Ah­mad, Chief Com­mis­sioner, Re­gional Tax Of­fice, Karachi while ad­dress­ing a jam packed sem­i­nar or­ga­nized by ICAP South­ern Re­gion Com­mit­tee (SRC) here at Karachi.

Dur­ing his ad­dress, the top sales tax of­fi­cial of FBR di­lated upon rea­sons why Government failed to in­tro­duce a broad based Value Added Tax (VAT) in 2009. He ex­plained that in the past FBR's en­force­ment arm was frozen for some­time re­sult­ing in sus­pen­sion of tax au­dits; as a re­sult most of the field of­fi­cers for­got tech­niques for con­duct­ing mean­ing­ful tax au­dits.

How­ever, he agreed that col­lec- tion of sales tax through with­hold­ing schemes was nega­tion of self as­sess­ment, which should be dis­cour­aged. Aimed huge ap­plause, Khawaja Tan­veer Ah­mad cat­e­gor­i­cally de­clared that SRO 98 will be amended to cater and suit busi­ness op­er­a­tions and no busi­ness needs to mod­ify its op­er­a­tions due to the new with­hold­ing tax scheme.

Upon a ques­tion, the Chief Com­mis­sioner also clar­i­fied that FBR has no ob­jec­tion to al­low in­put tax cred­its to its tax­pay­ers whose cor­re­spond­ing out­put tax was be­ing paid in SRB or PRA kitty.

Ear­lier, while mak­ing a com­pre­hen­sive and elab­o­ra­tive pre­sen­ta­tion on SRO 09, M. Adnan Mufti FCA, CPD Con­vener SRC di­lated at length about leg­isla­tive his­tory of Sales Tax With­hold­ing Tax Rules 2007.

He high­lighted that due to re­scind­ing of SRO 603, the re­quire­ment of tax de­duc­tion on pur­chase from un­reg­is­tered sec­tors has been done away with. He also ex­plained the back­ground of Sec­tions 2(21a) and 7 of Fed­eral Ex­cise Act 2005 read with RSO 543(I)/2008 dated 11 June 2008 and con­tended that ex­cus­able goods and ser­vices are out­side the purview of Sales Tax With­hold­ing Rules 2007.

He ap­pre­hended that as a re­sult of new mea­sures, cor­po­rate with­hold­ing agents might start / shift busi­ness in the name of AOP / In­di­vid­u­als; thus, cor­po­ra­ti­za­tion would be ham­pered and ad­versely af­fected. Al­ter­na­tively, mman­u­fac­tur­ers / im­porters might pre­fer sales to un­reg­is­tered sec­tors or to AOPs / In­di­vid­u­als not li­able to with­hold tax.

On the is­sue of in­come tax / ex­cise duty as­sesses be­ing classi- fied as sales tax with­hold­ing agents, Mufti em­pha­sized that the pro­vi­sions of In­come Tax Or­di­nance 2001 and Fed­eral Ex­cise Act 2005 do not pro­vide any ref­er­ence, author­ity or re­liance upon Sales Tax Act 1990 and rules made there­un­der for col­lec­tion of sales tax for a com­pany, not oth­er­wise in sales tax fold, which may be made li­able to with­hold sales tax.

On the con­trary, such rec­i­proc­ity or counter ref­er­ence only finds place in Sec­tions 2(21a) & 7 of Fed­eral Ex­cise Act 2005 and Sec­tion 2(14)(c) of Sales Tax Act 1990 whereby ex­cise duty is made ad­justable as sales tax and vice versa.

Tak­ing up a key is­sue re­gard­ing ap­pli­ca­bil­ity of SRO 98 on in­voices is­sued prior to 14 Fe­bru­ary 2013, Adnan Mufti re­ferred to FBR's clar­i­fi­ca­tion dated 17 Au­gust 2009 whereby it was clar­i­fied that old in­voices will not at­tract with­hold­ing tax. He elab­o­rated that un­der SRO 98, 1/5th of the amount of sales tax, shown on the face of tax in­voice, needs to be de­ducted. For in­stance, ex­tra tax @ 0.75% would also un­dergo tax with­hold­ing over and above 16%.

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